Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision:11.10.2019
+ CUSAA 195/2019, CM APPL. 30592/2019
COMMISSIONER OF CUSTOMS (IMPORT) ..... Appellant
Through: Mr. Harpreet Singh, Sr. Standing
counsel with Ms. Suhani Mathur,
Adv.
Versus
M/S TRINETRA IMPEX PVT. LTD. ..... Respondent
Through: Mr. Tarun Chawla, Adv.
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
HON'BLE MR. JUSTICE SANJEEV NARULA
SANJEEV NARULA, J. (Oral):
1. The present appeal under Section 130 of Customs Act, 1962 is directed
against the final order No. 55775-55776/2017 dated 10.08.2017 passed by
the Customs Excise and Service Tax Appellate Tribunal in Appeal No.
C/53509/2015 whereby the appeal of M/s Trinetra Impex Pvt.
Ltd./Respondent has been allowed and the penalties imposed under Section
112 (b) and 114AA of the Customs Act, 1962 (hereinafter as „Act‟) on the
Director of the Respondent have been set-aside.
2. Brief facts of the case are that M/s Trinetra Impex Pvt Ltd. is a holder of
Customs House Agent (hereinafter as “CHA”) license issued under Section
9(1) of the Customs House Agent Licensing Regulation, 2004. One M/s
Anurag Trading Co. imported various goods such as vulcanizing press
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machines, hydraulic splitting machines, hydraulic flashing machines,
hydraulic shaving machines etc for supplying the same to Ordinance
Equipment Factory (OEF), Kanpur. At the time of filing of Bills of Entries,
the importer claimed exemption from customs duty under the Notification
No. 39/96-Customs dated 23.07.1996 on the strength of Customs Duty
Exemption Certificates (CDECs) purportedly issued by OEF, Kanpur.
Subsequently, Customs Department received an input from the Chief
Vigilance Officer, Ministry of Defence, Ordinance Factory Board, Kolkata
through the Chief Vigilance Officer, CBEC, New Delhi informing them that
the CDECs filed by M/s Anurag Trading Company had not been issued by
OEF, Kanpur and that the importer had committed a fraud. On the basis of
the aforesaid information, the Customs Department carried out
investigations and pursuant thereto, a Show-cause notice dated 08.07.2011
was issued with respect to the Bills of Entries pertaining to the goods
imported by M/s Anurag Trading Company without payment of duty on the
basis of forged Customs Duty Exemption Certificates. Under the said show
cause notice, penalties were also proposed against Sh. Kailash Gupta,
Director of M/s . Trinetra Impex Pvt. Ltd., CHA/Respondent. On further
investigation, another Show-cause notice dated 06.03.2013 was issued in
respect of 39 Bills of Entries filed by M/s Anurag Trading Co. for the period
between 14.08.1996 to 23.07.2006. In the said Show-cause notice as well,
penalties were proposed against Mr. Kailash Gupta, Managing Director of
the Respondent CHA. The aforesaid Show-cause notices were adjudicated
vide common Order-in-Original No. 09-10/2015/SRB/Commissioner
(Import) dated 30.06.2015 and a penalty of Rs. 5 lacs under Section 112 (a)
of Act was imposed on Mr. Kailash Gupta, Managing Director of CHA in
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respect of show cause notice dated 08.07.2011; and a penalty of Rs. 10 lacs
was imposed under Section 112 (b) and Rs.5 lacs under Section 114 AA of
the Act in respect of show cause notice dated 06.03.2013. For the sake of
completeness, it would be appropriate to note that under the afore-noted
Order-in-Original, the demand and recovery of customs duty and penalties
were also ordered against the importer-M/s Anurag Trading Company.
However, since the present appeal pertains only to the CHA, we are
confining our probe into the impugned order to the extent it pertains to the
penalties set-aside against the Respondent.
3. In the Order-in-Original dated 30.06.2015, it was held that it was
imperative on part of the CHA to ensure that only valid and genuine
exemption certificates were submitted with the Customs Department. It was
held that since the Duty Exemption Certificates were found to be forged,
notwithstanding the fact that the importer had handed over such certificates
and affirmed the correctness and genuineness thereof, it was necessary for
the CHA to have gone into the question of validity and the genuineness of
the said documents. The CHA cannot take the plea of innocence and acting
in good faith. Having failed to practice diligence in ensuring submission of
correct information and proper documents, it was held that Section 112 (b)
and Section 114AA of the Act would be attracted in respect of the show
cause notice dated 06.03.2013. However, viz-a-viz show cause notice dated
08.07.2011, penalties were imposed only under Section 112 (a) of the Act.
4. The aforesaid order was challenged in appeal by the importer as well as
the CHA. The said appeals were decided by a common order dated
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10.08.2017, whereby the Central Excise and Service Tax Appellate Tribunal
(hereinafter as „CESTAT‟), allowed the appeal of CHA in respect of both
the show cause notices and set aside the penalties, holding that there was
nothing on record to show that the CHA had any role to play in forging the
certificates and misleading the customs authorities.
5. In the present appeal, the Customs Department impugns the order of the
CESTAT allowing the appeal of the CHA, on the ground that the Tribunal
was not justified in dropping the penalties, without considering the merits of
the case. The Tribunal has failed to consider the failure on part of the
Respondent in discharging its duties and responsibilities as a CHA. Mr.
Kailash Gupta, the Managing Director of the Respondent company in his
statement dated 05.03.2009 admitted that he knew that exemption
certificates were signed by the General Manger, OEF, Kanpur and as per the
relevant notifications, the certificates ought to have been issued by an officer
not below the rank of Joint Secretary to Government of India, Ministry of
Defence. Despite being aware of the above legal position, he did not
exercise due care in checking the genuineness of the exemption certificates
and carelessly accepted the version of the importer that the General Manager
of the OEF was equivalent in rank to the Joint Secretary of Government of
India. The CHA was obligated to verify whether the goods were eligible for
exemption or not. Since it failed to discharge its statutory obligations, it is
liable to the imposition of the penalty under of the Act.
6. We have heard Mr. Harpreet Singh, learned senior standing counsel for
Customs Department at considerable length.
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7. The relevant provision under the Act relating to imposition of penalty on
the CHA are as follows:
“Section 112 - Penalty for improper importation of goods,
etc—Any person,—
(a) who, in relation to any goods, does or omits to do any
act which act or omission would render such goods liable to
confiscation under section 111, or abets the doing or
omission of such an act , or
(b) who acquires possession of or is in any way concerned
in carrying, removing, depositing, harbouring, keeping,
concealing, selling or purchasing, or in any other manner
dealing with any goods which he knows or has reason to
believe are liable to confiscation under section 111 ,
shall be liable, --
(i) in the case of goods in respect of which any prohibition
is in force under this Act or any other law for the time being
in force, to a penalty [not exceeding the value of the goods
or five thousand rupees], whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited
goods, subject to the provisions of section 114A, to a
penalty not exceeding ten per cent. of the duty sought to be
evaded or five thousand rupees, whichever is higher:
Provided that where such duty as determined under sub-
section (8) of section 28 and the interest payable thereon
under section 28AA is paid within thirty days from the date
of communication of the order of the proper officer
determining such duty, the amount of penalty liable to be
paid by such person under this section shall be twenty-five
per cent. of the penalty so determined.
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(iii) in the case of goods in respect of which the value stated
in the entry made under this Act or in the case of baggage,
in the declaration made under section 77 (in either case
hereafter in this section referred to as the declared value) is
higher than the value thereof, to a penalty [not exceeding
the difference between the declared value and the value
thereof or five thousand rupees], whichever is the greater;
(iv) in the case of goods falling both under clauses (i) and
(ii), to a penalty [not exceeding the value of the goods or the
difference between the declared value and the value thereof
or five thousand rupees], whichever is the highest;
(v) in the case of goods falling both under clauses (ii) and
(iii), to a penalty [not exceeding the duty sought to be
evaded on such goods or the difference between the
declared value and the value thereof or five thousand
rupees], whichever is the highest].”
(emphasis supplied)
“Section 114AA - Penalty for use of false and incorrect
material-
If a person knowingly or intentionally makes, signs or uses,
or causes to be made, signed or used, any declaration,
statement or document which is false or incorrect in any
material particular, in the transaction of any business for
the purposes of this Act, shall be liable to a penalty not
exceeding five times the value of goods.”
(emphasis supplied)
8. At this juncture, before we go delving into the merits of the case, it would
be worthwhile to note that the Commissioner of Customs (General) had also
initiated proceedings against the CHA under the provisions of Customs
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House Agent Licensing Regulations, 2004, which culminated in passing of
the order dated 12.05.2015 whereby a punishment of forfeiture of security
deposit of Rs. 50,000 was imposed. The said order was impugned by the
Customs Department before the Court by way of appeal under Section 130
of the Act before this Court titled as Commissioner of Customs (Import
and General) New Delhi v. M/s. Trinetra Impex Pvt. Ltd , CUSAA -
62/2017 on the ground that the punishment was not proportionate and
commensurate with the allegations. The said appeal has been decided by an
order dated 11.12.2017 and the appeal of the Customs has been dismissed in
limine . The observations of the Court in the said order are germane and
relevant for deciding the present appeal and same are being extracted
hereinbelow:
“4. The importer M/s Anurag Trading Company, Kanpur had
used forged documents purportedly issued by the Ordinance
Equipment Factory, Kanpur. Director of the Respondent
company had admitted that the exemption certificate was not
signed by the General Manager of the Ordinance Equipment
Factory, Kanpur and as per notification, the said certificate
should be issued by an officer not below the rank of Joint
Secretary to the Government of India in the Ministry of Defence.
5. The findings recorded both by the Commissioner of Customs
(General) in the order dated 12th May, 2015 and the order
passed by the Appellate Tribunal is primarily factual. The
Commissioner of Customs, after examining the factual matrix
had concluded though the Respondent had failed to discharge its
duties and responsibilities properly, yet a harsher punishment
was not justified. The Respondent's director had professed that
they had been dealing with M/s. Anurag Trading Company,
Kanpur since 2003, they had merely processed the documents
and forwarded the same to the customs authority. It was the
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obligation of the customs authorities to examine applicability
and satisfaction of the condition of the exemption notification
and genuineness of the documents submitted by the importer.
While examining the documents, it did not strike them and there
was no reason for them to suspect that the exemption certificate
was not signed by the competent authority or that it was forged.
Thus, they were unaware and not involved in forgery of the
documents. They were also duped and were victims.
6. By our order dated 17th November, 2017, the appellant was
asked to clarify when departmental action was taken against the
officers of the department, who accepted the certificate. Custom
officers had also accepted the documents without suspecting foul
play and notwithstanding that the document was not signed by
the approved officer.
7. Today, during the course of hearing, learned counsel for the
appellant has handed over a copy of the letter written by the
Assistant Commissioner (Legal) stating that no action appears to
have been taken against the officers of the department, though
statements of 11 officers were recorded. The reason was that
nothing could be found to establish malafide intention of the
officers and their connivance.
8. The Central Bureau of Investigation (‘CBI’) had also
investigated the issue of bogus exemption certificate. They have
not charge-sheeted the Respondent. As per the charge-sheet,
placed on record, FIR under Section 120B of the Indian Penal
Code read with Sections 420/467/468/471 of the Indian Penal
Code has been filed against Mr. Shyam Mehrotra, Proprietor of
M/s Anurag Trading Company, Kanpur and Mr. Anand
Mehrotra, Manager and Authorized Signatory of M/s Anurag
Trading Company, Kanpur and the proprietorship concern.
CBI after investigating role and involvement of the Respondent
and found that the CHA (the Respondent) had received a copy
of the bill of exchange with zero customs duty duly signed by
the then Custom officer. The CBI has also stated in the charge
sheet that the Respondent CHA had retained photocopies of the
said bill of exchange for its office records and had forwarded
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the original copies of the same along with his bill to the
importer for getting payments - thus clearly implying that the
CHA had performed its part of the duties and no role in the
forging of the bill of exchange. The Respondent’s direct
involvement with the importer i.e. the beneficiary was not
established. ”
( emphasis supplied )
9. The incident that resulted in the initiation of parallel proceedings against
the Respondent under Customs Broker Licensing Regulations and the
Customs Act, 1962 is the same. Thus, the facts noted in the order dated
11.12.2017 assume significance and on perusal of the same, it clearly
emerges that the Court considered the obligation of the Customs authorities
to examine the applicability of the conditions of the exemption Notification
and genuineness of the documents submitted by the importer. The Court
also drew adverse inference on account of the fact that no departmental
action had been taken against officers of the department. Pertinently, it was
noted that the Central Bureau of India (CBI) had also investigated the
issuance of bogus exemptions certificates and had not charge-sheeted the
CHA. The charge-sheet was filed only against the proprietor of the importer
and its authorized signatory and the proprietorship concern. The CBI in its
charge-sheet recorded that the CHA had retained photocopies of the bills of
exchange for its office records and had forwarded the original copies of the
same along with his bill to the importer for getting payments. Thus, CHA‟s
direct involvement with the importer was not established. This fact
prevailed upon this Court in dismissing the appeal filed by the Customs
Department, not finding it to be fit to impose harsher penalty.
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10. Now coming to the facts of the present case. The facts noted above are
not disputed before us, however, the Customs Department is aggrieved by
the deletion of the penalties imposed on the CHA. In respect of the show
case notice dated 06.03.2013, penalty has been imposed under Section 112
(b) as well as 114AA of the Act. A perusal of the said provisions clearly
reveals that the penalty under the said provisions can be imposed wherever
there is an element of mens rea or conscious knowledge, which is a sine qua
non for imposition of the penalty. This is evident from a plain reading of
Sections 112 and 114AA of the Act, which uses the expressions “does or
omits to do” , “or abets the doing or omission of such act”, “which he knows
or has reason to believe are liable to confiscation under Section 111”- in
Section 112 and “knowingly or intentionally” in Section 114AA . The facts
of the case in hand do not reveal any such element of mens rea or conscious
knowledge qua the importer. There is no active role attributed to the
Respondent, which justifies the imposition of the penalty under Section 112
(b) and Section 114AA of the Act. Nothing has emerged even in the
criminal investigation.
11. In respect of the show cause notice dated 08.07.2011, the imposition of
the penalty has been made under Section 112 (a) of the Act in respect of the
goods which have been held to be liable to be confiscated under Section 111
of the Act. Here, the imposition of the penalty on the CHA is founded on
the ground that he has abetted the offence. Though, for imposition of penalty
in respect of the cases falling under Section 112 (a) of the Act, mens rea
may not be required to be proved as condition precedent, however, when it
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comes to imposition of the penalty on an abettor, it is necessary to show that
the said essential element/ ingredient is present. [Ref: Amritlakshmi
Machine Works v. The Commissioner of Customs (Import) 2016 SCC
OnLine Bom 66. ]
12. In the present case, there is no element of mens rea or conscious
knowledge which can be attributed to the CHA. The investigation carried
out by the CBI and other facts reveal that the CHA acted bona fide and
merely facilitated the imports on the strength of the documents which were
handed over to him by the importer. There is no sufficient material on record
to show that the CHA was actively involved in the fraudulent availment of
the exemption by the importer, warranting levy of personal penalty.
Therefore, we do not find any ground to interfere with the findings of the
Tribunal vis-a-vis the Respondent.
13. Since, the present appeal does not raise any substantial question of law
that requires any adjudication by this Court under Section 130 of the
Customs Act, the appeal is dismissed in limine without any order as to costs.
SANJEEV NARULA, J
VIPIN SANGHI, J
OCTOBER 11, 2019
Pallavi
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